The four-hour meeting at Lefkosia´s abandoned airport in the
U.N.-patrolled buffer zone followed the ceremonial launch of official
negotiations a week ago.

We began negotiations on the substance of governance and power-sharing.
The talks have been productive and... fruitful, Downer said, adding
that the leaders would meet again on September 18.

There are no particular timelines agreed, but the two leaders are doing
what they can to push the process ahead at the appropriate speed.
Theres a long way to go.

Talat arrived for the meeting first, greeting waiting reporters in
Turkish, Greek and English. Christofias, who arrived shortly afterward,
was asked which language the two leaders would use to negotiate.

Its a unique language of peace that will keep us together, he said
before heading into the meeting.

A U.N. official, who asked not to be identified, told the (Associated
Press) with a smile only that "there wasnt any shouting", when asked to
comment on the tenor of the negotiations.

The two leaders are expected to meet at least once a week in a bid to
find a settlement.

The complex and challenging process of finding a negotiated settlement
of the Cyprus problem has started in earnest, U.N. chief of mission
Taye-Brook Zerihoun told (Agency France Press) on Wednesday.

The road ahead will be pot-holed and sometimes perilous, but it does
not look blocked. Pursuit of the greater good of the people of Cyprus
is key to overcoming past rancor and division, and in ushering in a new
era of cooperation, prosperity and peace based on respect for diversity
and shared principles, he added.

Thursday's talks will initially focus on power-sharing and
administrative issues but a war of words has clouded the feel-good
climate -- highlighting sharp differences on the issues of security,
territory and Turkish settlers.

The negotiations launched on September 3 mark the first major push for
peace since the failure of a U.N. reunification plan in 2004, which was
approved by Turkish Cypriots but overwhelmingly rejected by the Greek
Cypriots.

Christofias said last week that reaching an agreement would not be an
easy job, while Talat has expressed hope for a solution as soon as
possible.

My vision was to finish the negotiations by the end of this year and I
believe it is possible, he said in Brussels on Wednesday. The both
sides agreed on June, 2009 as target date for a solution, he added.

Talat also said he accepts a reduction of Turkeys military contingent
but that his side will still need security guarantees from HYPERLINK
"http://www.hurriyet.com.tr/index/Ankara/" \t "blank" Ankara as part
of a deal.

U.N. special envoy Alexander Downer has visited both Athens and
HYPERLINK "http://www.hurriyet.com.tr/index/Ankara/" \t "blank" Ankara
to ensure all parties are engaged in the process.

Turkish executives have told Downer that Turkey attached great
importance to finding a solution to the Cyprus question within the
scope of established U.N. parameters, a Turkish Foreign Ministry
spokesman told the Anatolian Agency.

Preparatory talks which began in March have been accompanied by
confidence- building measures, notably the opening of a crossing in
Ledra Street linking south and north in the symbolic heart of Nicosia.

Past peace efforts have repeatedly floundered on the same sticking
points - power-sharing arrangements, property rights for displaced
Cypriots, the nature of a future federation and the intervention rights
for Turkey and Greece. The two countries remain the guarantor powers
for the island, which gained independence from Britain in 1960.

The local papers reported yesterdays meeting with the following
titles:

HALKIN SESI: Work started at the negotiations

KIBRIS: Bargaining started

YENIDUZEN: Four hours, the beginning

BAKIS: It started in silence

VOLKAN: Christofias: The issue of those who came from Turkey will be
put on the negotiation table

ORTAM: Constructive and fruitful

VATAN: The comprehensive talks began

STAR KIBRIS: Black-out at the negotiations

AFRIKA: A black-out at the negotiations

CYPRUS TIMES: 16th time lucky?

KIBRISLI: The fears of the Greek Cypriots behind the door!

GUNES and SOZCU papers do not report anything on the launch of the
negotiations.

[02] Talats statements to TRT2 right after the meeting with President
Christofias

Turkish Cypriot daily Halkin Sesi newspaper (12.09.08) reports under
banner headlines in its front page under the title: Talat: Some
developments that Greek Cypriots fear, could come to the fore. and
quotes Mr. Talats statement to Turkeys TRT2 television program Gunun
Konusu - Topic of the Day and says that Mr. Talat implying Kosovo,
Abkhazia and South Ossetia said: "Considering recent developments in
the world, some developments, that Greek Cypriots fear, could come to
the fore. That's why I think, their need or desire for a solution could
be stimulated."

Mr. Talat went on and said that he still maintains his optimism as
regards the solution of the Cyprus problem adding that settlement of
the Cyprus issue was a need, not only for the Turkish Cypriots but also
for the Greek Cypriots.

Mr. Talat explained the reasons why the direct negotiations started
with governance and power sharing saying that if progress is scored on
these issues it would be more meaningful to take up the other issues.
He said that they will continue the negotiation on the governance and
power sharing at the next meeting.

Noting that political equality is very important for the Turkish
Cypriots, Mr. Talat said that political equality made itself felt at
the governance and power sharing. He went on and added that during the
negotiations on the power sharing the sovereignty element will be
discussed as well.

What kind of a government it will be is not that much important as the
power and authority to be vested on the federal governments. What is
important is for the authority and power to be exercised by the Turkish
Cypriot people. What we will do, is to define only the federal powers.
Once we define the federal powers we will stop there because the rest
will be the powers and authority of the founding states. Our thesis is
based on the political equality of the Turkish Cypriot people and the
Greek Cypriot people, Mr. Talat said and added it was also important
that the Turkish Cypriot state and the Greek Cypriot state will have
equal status.

We are most sensitive to the political equality of the two
peoplesPolitical equality will be between two peoples, but as regards
the states it will be equality of status, Mr. Talat stressed.

The paper reports that Mr. Talat said that during yesterdays meeting on
some issues they have reached common points, but he refused to
elaborate on them. Mr. Talat went on and said that negotiations were
going on and it is not possible to carry out negotiations in the press.
The Turkish Cypriot leader declared that issues taken up at the
negotiations will not be discussed in the press.

When asked to comment on President Christofias statement that the Greek
Cypriot side reached to its concession limits and cannot make further
concessions, Mr. Talat said that such statements are for domestic
consumption and that it is not possible to reach an agreement without
entering into give and take process. Without demonstrating flexibility
and making concession it is not possible to reach an agreement. This is
known to everybody. He will make concessions and we will make
concessions. This is the right thing to do. It is out of the question
not to make concessions, Mr. Talat declared and accused the press,
especially the Greek Cypriot press, for speculative reports.

Halkin Sesi reports that Mr. Talat said that they were after a
comprehensive solution and that once the comprehensive agreement is
reached only then it would be submitted to the referendum. Mr. Talat
also said that in their negotiation thesis the Annan plan has an
important place and it is their source of inspiration, but, he said:
The plan was not on the negotiating table.

Mr. Talat further said that the issues the sides cannot agree on will
be filed and the next issue will be taken up and later on they will
return and take up issues that they disagreed. Mr. Talat said that
during yesterdays meeting they did not discuss the presidency issue.

As for the Treaties of Guarantee and Alliance Mr. Talat said that this
is an international agreement and if all the sides party to this
agreement consent then the agreement will be changed and he already
said this to the Greek Cypriots. He added that the Greek Cypriot
concern regarding the continuation of Turkeys guarantorship and the
Treaties of Guarantee and Alliance is not a real concern. He said that
Turkey did not interfere without any reason. In fact Ankara was late in
interfering in the island, he stated.

As for the property issue Mr. Talat said that since this issue concerns
everybody it is the most difficult issue in the negotiations, and thus
solution of this problem will be spread over a time period. He said
that it will be a regrettable event if the property issue becomes the
reason for not approving the agreement.

Commenting on the UN Secretary-Generals Special advisor on Cyprus Mr.
Alexander Downers attitude, Mr. Talat said that it was good.

(MHY)

[03] Milliyet publishes the positions of the sides on governance and
power sharing

Turkish daily Milliyet newspaper (12.09.08) refers to the start of the
comprehensive negotiations under the title The work has started and
writes that the two leaders in Cyprus discussed yesterday further steps
to be taken in the coming months on administrative issues and share of
power on the island.

Invoking information, the paper adds that during yesterdays meeting,
the two leaders discussed the authorities of the federal organs. The
paper publishes also the positions of the two sides regarding the
issues of administration and power sharing, as follows:

What the Turkish side wants?

The Federal State should be administrated by a presidential council
which the parliament will elect from one single list.

The rotation of the president and the vice-president should last 12
months (a total of three years to the Turkish and three years to Greek
presidents).

The presidential council shall be composed of 7 persons, 4 Greeks and 3
Turks. On the decisions taken by single majority this should include
positive vote from two members from each community.

The representation of the Turkish Founding State to the House of
Representatives should be 1/3.

What the Greek side wants?

The Federal State should be administrated with a presidential system.
The President and the vice-president should be elected by the citizens
of the Federal Republic.

The Presidency should be a rotating one. The Greek President should
remain at the presidency for 4 years and the Turkish President for 2
years.

The Council of Ministers shall be composed of 9 persons, 6 Greeks and 3
Turks. Decisions for which no consensus can be reached, to be taken by
simple majority on condition that one member from each federal unit
takes part.

The Turkish Federal Unit shall be represented in the House of
Representatives by ¼.

(AK)

[04] The so called police released the youth arrested writing graffiti
against the occupation army, yet their names were put on the stop-list

Turkish Cypriot daily Kibris newspaper (12.09.08) reports that the four
Turkish Cypriot youth who were arrested and put under custody for
writing graffiti against the Turkish occupation army, were set free on
bail by a so-called court of the breakaway regime. However, the four
young men were put on the stop-list for traveling abroad. The United
Cyprus Party (BKP) criticized the decision taken against the four and
branded it unacceptable.

(MHY)

[05] Members of twenty eight countries are participating in the General
Assembly of UWE taking place in occupied Keryneia

Turkish Cypriot daily Kibris newspaper (12.09.08) reports that the
General Assembly of the Federation of University Women of Europe (UWE)
is being held in occupied Keryneia. The theme is Womens Role in
Creating Peace. The meeting is attended by ninety women from twenty
foreign countries in addition to eighty women from Turkey.

(MHY)

[06] Omer Adal stated that FIFAs proposal to the Turkish Cypriots to
become a member of KOP does not concern football only

Turkish Cypriot daily Kibris newspaper (12.09.08) reports that the
so-called chairman of the self-styled Turkish Cypriot Football
Federation, Mr Omer Adal, in a statement said that the Greek Cypriot
press reports that they have accepted the FIFA proposal that the
Turkish Cypriots should become member of the Cyprus Football
Association (KOP), is totally a Greek Cypriot press interpretation. He
went on and said that this issue does not concern football only but it
is an issue that could affect directly the political negotiations being
carried out currently between the two leaders. He said that their final
answer will be given in the light of the ongoing negotiations between
the two leaders.

Sergey A. Markov, an advisor to Russian Prime Minister Vladimir Putin,
said Turkey should form an economic alliance with Russia and former
Soviet countries.

Attending an international security conference yesterday in Istanbul
organized by a Turkish think tank, Markov told Todays Zaman that he is
speaking to Turkish officials about the idea of starting such an
economic union.

Turkey should join an economic union with Russia, Ukraine, Kazakhstan,
Uzbekistan, Moldova, Belarus, Armenia and Azerbaijan and Georgia, too.
Who is Mikhail Saakashvili? He is not there to stay. He will go like
Hitler! said Markov, a consultant with the Security Council for the
President of Russia and director of the Institute for Political Studies
in Moscow.

Markov said Russia has reservations because neither Turkey nor the
European Union condemned Georgian President Saakashvili or declared him
a war criminal following Georgias attack on autonomous South Ossetia in
early August, which resulted in a crushing Russian assault there.

He also warned that Turkey should not rely on the EU because it will
not accept Turkey as a full member. He said Turkey could still have
relations with the EU and continue to have its NATO role.

We dont want to have a conflict with NATO, and we like the EU. They
need our gas and we need their money, he said.

He also warned that Turkey should not rely on the EU because it will
not accept Turkey as a full member. He said Turkey could still have
relations with the EU and continue to have its NATO role.

Lets open our borders for trade. Only poor, angry and hungry people
want to fight. And the EU would never want to deal with them, he
added.

On the other hand, he said, both the Russian and Turkish economies are
compatible and their political cultures have similarities. He said
Turkey and Russia would complement each other in many areas. We have
energy for Turkeys needs. We have many construction opportunities for
Turkish firms. We need labor, and Turkey can provide it, he commented.

He also said that Turkeys Caucasus initiative has a chance of success
if it includes Russia and excludes the United States. The United States
is a dangerous power. The neocons in Washington are the main threat to
international stability.

He added that a comeback for the Cold War is an American desire, not a
Russian one, as some claim. Russia now has billionaires, not
communists. We dont want separation from the West.

Markov was participating in a panel discussion yesterday afternoon
titled Geopolitics of Energy at the Ar1 Movement s 10th International
Security Conference.

[08] Turkey´s anti-terror summit against PKK ends: The fight against PKK
is nearing an end

Turkish daily Today´s Zaman newspaper (12.09.08) reports that Turkish
political and military leaders who came together to discuss security
and the legal, economic, socio-cultural, psychological and
international aspects of the war against terrorism yesterday concluded
that the fight against the Kurdistan Workers' Party (PKK) is nearing an
end, according to a statement released in the evening by the Prime
Ministry.

"With the determination that was shown in the meeting, the support of
our people for our security forces and sensitivity regarding this issue
being predominant in all segments of society, the duration of this
fight against the separatist terrorist organization, which is close to
the breaking point, is growing shorter," the statement said.

[09] Turkish political parties received YTL 760 million for 2003-2008
period

Turkish daily Today´s Zaman newspaper (12.09.08) reports that the
Ministry of Finance has announced that the Treasury has given out
nearly [New Turkish Lira NTL] 760 million to political parties as
Treasury aid in the period between 2003 and 2008.

The biggest share of funds has been taken by the ruling Justice and
Development Party (AK Party), followed by six other parties.

The figures, announced by Finance Minister Kemal Unak1tan upon a
parliamentary question from Democratic Left Party (DSP) Istanbul deputy
Hasan Mecit, reveal that seven political parties had the right to
receive funds from the state in the relevant time period. These parties
include the Motherland Party (ANAVATAN), the Social Democratic People's
Party (SHP), the True Path Party (DYP), the Republican People's Party
(CHP), the Nationalist Action Party (MHP), the AK Party and the Young
Party (GP).

While the AK Party received the largest share, with nearly YTL 330
million, it was followed by the main opposition CHP, with nearly YTL
180 million, and the MHP, with close to YTL 85 million.

Following are the summaries of reports and commentaries of selected
items from the Turkish press on 11 September:

a) Lighthouse Scandal Case:

In an article entitled "Those who want are guilty, but others who
receive are innocent," Hurriyet columnist Ertugrul Ozkok accuses
Turkish Prime Minister Recep Tayyip Erdogan of applying double
standards to media establishments depending on their relations with the
ruling party. Citing allegations made about the sale of Sabah and an
application filed by the Calik group which has taken over Sabah in
order to obtain a license for its bank as examples of nepotism, Ozkok
comments: "This nepotism and Saddamization trend gradually captures the
attention of the whole world. It reflects a mentality indicating that
you could get nothing if you do not support them. Their anxiety and
anger results from those murmurings of criticism intensifying both in
Turkey and the rest of the world."

A report entitled "The real perpetrators are here" in Hurriyet
highlights comments made by Kemal Kilicdaroglu, deputy leader of the
parliamentary delegation of the Republican People's Party (CHP), who
attended a hearing held as part of the trial of a group of defendants
accused of financial irregularities in the transactions of Lighthouse
Association's branch in Germany. Kilicdaroglu claims that the
defendants standing trial in Germany are only pawns, adding that the
real masterminds of the scam are in Turkey. He also accuses the Turkish
government of lending political support to the perpetrators by
remaining silent.

According to a report entitled "Allegations about funds channeled to
AKP come under close scrutiny" in Hurriyet, the Office of the Chief
Public Prosecutor of the Supreme Court of Appeals is examining
allegations that the Lighthouse Association sent money from Germany to
Turkey by couriers in order to fund the AKP's election campaigns. The
report says that the Chief Prosecutor's office may decide to seek
information and documents from German authorities depending on the
outcome of the probe.

In an article entitled "About the Lighthouse issue," Milliyet columnist
Fikret Bila points out that the government has responded to allegations
about connection between the Lighthouse Association and the AKP by
launching a counterattack against Aydin Dogan, owner of the Dogan
Group, and CHP leader Deniz Baykal although its accusations are
irrelevant to the Lighthouse case. He says: "The Prime Minister,
ministers, and AKP officials were expected to investigate those
allegations of corruption linked to Turkey rather than trying to cover
up the matter and to divert attention to other issues."

A report entitled "Karaman is the key figure" in Milliyet summarizes
the indictment issued by German public prosecutors against the managers
of the Lighthouse Association and says that Zekeriya Karaman who owns
Kanal 7 television station, Mehmet Gurhan who served as the
Association's chairman until November 2006 and now stands trial, and
Zahid Akman, Chairman of the Radio and Television High Council, are
among the shareholders of various companies based in Turkey and abroad.
The report also highlights alleged relations and flow of money between
the Association and various companies in Turkey.

In an article entitled "The Ruling Party in another tunnel of horror,"
Vatan columnist Gungor Mengi says that it should not be difficult to
reveal organic ties between the Lighthouse associations in Turkey and
Germany and the AKP, reminding that the AKP boldly granted some
privileges to the Lighthouse Association in 2004 after the Council of
State turned down the association's first application. He predicts that
the AKP will face serious troubles if it is eventually proven that it
has received funds from the Association's branch in Germany.

A front-paged report in Vakit entitled "What a lie," accuses Aydin
Dogan of distorting the truth in claiming that his newspapers reported
on the corruption case against the charity Deniz Feneri [Lighthouse] in
Germany on the basis of disclosures made by CHP leader Deniz Baykal on
NTV. According to the report, Deniz Feneri was in the headlines of
Milliyet the same day Baykal responded to an NTV correspondent's
questions about the said case.

b) Gul's visits to Azerbaijan and Armenia:

In an article entitled "Are we mediating or putting ourselves in a
difficult position?" Cumhuriyet columnist Mustafa Balbay says that the
Turkish government does not miss any opportunity to mediate in an
effort to resolve regional and international disputes. He cautions that
Turkey could eventually harm its ties with Azerbaijan as a result of
rapprochement with Armenia, adding that Ankara could also be forced to
take sides in the dispute between the United States and Iran if tension
further escalates.

In an article entitled "Visit to Yerevan," Cumhuriyet columnist Ali
Sirmen views the pros and cons of Gul's visit to Armenia and emphasizes
that the Turkish government would make a serious mistake if it reopens
border crossings with Armenia unless the latter changes its hostile
attitude toward Turkey. Pointing out that the EU and the United States
are putting pressure on Turkey in order to force it to reopen the
border crossing, Sirmen comments: "If we reopen the border without any
improvement in conditions which harm the essence of the relations
between the two countries, it would cause the visit to yield negative
rather than positive results. If we reopen the border without any
precondition, we would unavoidably face new demands."

In an article entitled "NATO allies Turkey and US may engage in a row
over Black sea", Today's Zaman columnist Lale Sariibrahimoglu asserts
that while the Caucasus crisis has created "new opportunities for
Ankara such as the start of dialogue with Armenia ... Turkey will have
a serious headache if and when its close ally US re-starts being pushy
on the Black Sea."

In an article entitled "It will not be easy to conciliate Azerbaijan",
Milli Gazete columnist Hasan Unal reiterates his argument that the
strategic goal of President Gul's recent visit to Armenia was to
isolate Azerbaijan, "the rising star of the region," and discourage it
from attempting a military operation to take back its territories under
Armenian occupation. He also claims that the visit has enabled Armenia,
international Armenian lobbies, and "the foreign forces that pressed
Gul into going to Yerevan" to make a lot of headway toward getting
Turkey to recognize the Armenian claims of genocide.

c) Economy:

In an article entitled "A growth performance which is difficult to
explain," Hurriyet columnist Ercan Kumcu focuses on the sharp decline
in Turkey's economic growth in the second quarter as compared with the
first three months of the year, emphasizing that there is not
sufficient data to identify the reasons behind that downward trend.

In an article entitled "Contraction of growth," Milliyet columnist
Hursit Gunes says that dwindling economic growth is ascribed to global
trends, political disputes and uncertainties, and the government's
tight monetary policy by different analysts. Noting that those factors
are not sufficient to explain deceleration observed in economic growth,
Gunes draws attention to a sharp decline in the government's spending
and investments which were slashed 3.7 percent and 14 percent,
respectively, in the second quarter.

In an article entitled "Why has economic growth slid?" Taraf columnist
Suleyman Yasar attributes the decline in Turkey's economic growth to
the government's indifference to problems faced by farmers, political
tension caused by the closure case instituted against the AKP, and the
Central Bank's decision to raise interest rates.

In an article entitled "Growth in the second quarter," Vatan columnist
Asaf Savas Akat argues that the slowdown observed in the Turkish
economy has resulted from wrongheaded monetary policies being pursued
since 2003 and an inflationist model disregarding industry, export, and
employment. He predicts the sharp decline in economic growth in the
second quarter heralds low growth over the long term.

Under the headline, "Closure case hobbles Turkish economy," Today's
Zaman carries a front-page report which asserts that "the growth rate
of the Turkish economy suffered a great blow in the second quarter,
coinciding with a closure case opened against the ruling ... AKP in
March 2008 ..."